The Pakistan government is considering a new initiative to attract private investment into the power sector in order to overcome an anticipated shortfall in capacity of 5500 MW by 2010.

A draft policy for power projects was to have been considered by the Economic Coordinating Committee at the end of August but the Ministry of Water and Power requested its withdrawal following a meeting between the federal power secretary and the chairman of the Water and Power Development Authority. It is not clear when the policy document will be resubmitted for consideration.

Under the draft proposals, solicited and unsolicited proposals were to have been invited from both local and international investors for development of hydro projects, wind projects and indigenous fuel-fired projects, with the main focus on hydro. These would be accepted on a Build-Own-Operate-Transfer basis because of their long lifetimes, with the project transferred to the host province once the operational contract period was completed. Other projects would be accepted on as Build-Own-Operate schemes.

Tariffs permitted for hydro projects would comprise three components, a firm capacity price, a peak energy price and an off-peak energy price. These three would be structured in such a way to ensure payment of debts, return on equity and sufficient revenue to cover operational and maintenance charges.

The National Electric Power Regulatory Authority would set the tariff for a project within six months of an application from a sponsor for a Letter of Support. One-window operations at federal and provincial level would also be provided to speed processing of a project.

Under the terms set by the government, registration and submission of a proposal would take 60 days while submission of prequalification documents would take a further 60 days. Documents would be evaluated within 70 days by the provincial authorities and an invitation to bid issued.